Pinocchio's Pupil: Using Eyetracking and Pupil Dilation To Understand Truth-telling and Deception in Games

Abstract

We conduct laboratory experiments on sender-receiver games with an incentive for senders to exaggerate (such as security analysts painting a rosy picture about earnings prospects). Our results show that “overcommunication”—messages are more informative of the true state than they should be, in equilibrium—is consistent with a level-k model. Eyetracking shows that senders look much more on the payoff rows corresponding to the true state, and much less at receiver payoffs than at their own payoffs. Senders ’ pupils also dilate more when their deception is larger in magnitude. Together, these data are consistent with the hypothesis that figuring out how to deceive another player is cognitively difficult as assumed in the level-k model. A combination of sender messages and lookup patterns predicts the true state about twice as often as predicted by equilibrium. Using these measures would enable receiver subjects to hypothetically earn